Outokumpu's annual accounts 2010 - stainless markets recovered in 2010, operating loss reduced

PRESS RELEASE
February 2, 2011 at 9.10 am EET

Year 2010 highlights
- Deliveries up 28%, stainless prices and metal prices higher
- Operating loss reduced to EUR 83 million, underlying operational result EUR -91 million
- Investments for EUR 550 million decided
- Dividend proposal EUR 0.25 per share (2009: EUR 0.35)

Fourth quarter highlights
- Operating loss EUR 85 million
- Higher deliveries, lower prices and reduced cost efficiency

After a very weak 2009, stainless steel markets recovered in 2010. The global consumption of stainless steel is estimated to have increased by 20%. In Europe, the growth was even stronger at 25%. Despite the strong recovery, European consumption is still well below its pre-crisis level. The demand in first half of 2010 was stronger and supported by restocking. During the second half metal prices declined and inventories were reduced. In early 2011, demand for standard grades began to pick-up. Demand for investment-driven end-use segments has not yet shown any major recovery.

Outokumpu's deliveries in 2010 increased to 1.3 million tonnes, up by 28%, representing approximately 75% capacity utilisation. Average reference base price was 8% higher than in 2009, whereas average transaction price, which also includes raw material cost, increased by 36%. Main raw materials of stainless steel were traded at clearly higher prices; nickel price was up by 49% and ferrochrome 46%. As a result of significant increases in both volume and price levels, Outokumpu's sales in 2010 totalled EUR 4.2 billion, 60% higher than in 2009.

Growth in delivery volumes and higher price levels enabled Outokumpu to reduce its loss from the previous year. The Group's ferrochrome operations also contributed to improved profitability as a result of increased production and higher price level. Operating loss in 2010 totalled EUR 83 million, compared with a loss of EUR 441 million in 2009. The underlying operational result, which excludes any raw-material related inventory gains or losses totalled EUR -91 million (2009: -343 million). Capacity utilisation below optimal levels, as well as weak geographic and product mix in sales were the main reasons for the loss-making result.

Towards the end of 2010 stainless markets softened, distributors were destocking and base prices declined. Outokumpu's deliveries in the fourth quarter were 336 000 tonnes, up by 21% from the fourth quarter of 2009, which together with metal price-driven transaction price increase resulted in 58% higher sales of EUR 1 162 million. Operating loss in the fourth quarter was EUR 85 million, higher than the EUR 31 million loss in 2009 or the EUR 49 million loss in the third quarter of 2010. The main reasons for this deterioration in profitability were lower base prices, weaker geographic and product mix and increased costs.

Due to higher delivery volumes and metal prices Outokumpu's working capital increased, consuming EUR 476 million of cash in 2010. Consequently, the Group's net debt increased and gearing amounted to 77% at the end of the year. The Board of Directors proposes a dividend of EUR 0.25 per share for 2010 (2009: EUR 0.35).

In 2010 Outokumpu reviewed some of its postponed investment projects and decided to proceed with two investments totalling EUR 550 million in June. Outokumpu will double the production capacity of ferrochrome in Tornio, Finland and expand the quarto plate production capability and capacity in Degerfors, Sweden.

Outokumpu's order intake has been encouraging from the beginning of 2011. Outokumpu estimates that delivery volumes in the first quarter of 2011 will be some 10-20% higher than in the fourth quarter of 2010. Operating profit in the first quarter is expected to be around break-even or slightly positive.

CEO Juha Rantanen:

"The market environment in 2010 continued to be difficult in our home market, Europe. Demand for stainless was well below the pre-crisis levels, especially for investment-driven applications. The resulting still rather low capacity utilisation and deteriorated cost-efficiency were the main reasons for the clearly loss-making result in 2010. Currently, the overall economic development indicates better stainless markets for this year. Our focus stays on the essentials; better profitability, stronger balance sheet and implementation of our strategy. Last year we made good progress on many operational areas, like safety, inventory levels and delivery performance. It gives me confidence to expect significant progress on our financial performance this year."

This press release presents the highlights of Outokumpu's official annual accounts bulletin, which has been distributed as a separate stock exchange release and is available at www.outokumpu.com/investors.

For further information, please contact:

Päivi Lindqvist, SVP - Communications and IR
tel. +358 9 421 2432, mobile +358 40 708 5351
paivi.lindqvist@outokumpu.com

Ingela Ulfves, VP - Investor Relations and Financial Communications
tel. +358 9 421 2438, mobile +358 40 515 1531
ingela.ulfves@outokumpu.com

Esa Lager, CFO
tel. +358 9 421 2516
esa.lager@outokumpu.com

OUTOKUMPU OYJ

Outokumpu is a global leader in stainless steel with the vision to be the undisputed number one. Customers in a wide range of industries use our stainless steel and services worldwide. Being fully recyclable, maintenance-free, as well as very strong and durable material, stainless steel is one of the key building blocks for sustainable future. Outokumpu employs some 7 500 people in more than 30 countries. The Group's head office is located in Espoo, Finland. Outokumpu is listed on the NASDAQ OMX Helsinki.
www.outokumpu.com